March 15, 2012

Rakoff Admonished by Appellate Judges in Citigroup Case

In a sharp rebuke to U.S. District Judge Jed Rakoff, the U.S. Court of Appeals for the 2nd Circuit on Thursday found that the U.S. Securities and Exchange Commission and Citigroup Global Markets Inc. are likely to prevail in showing the New York judge was out of line in rejecting their $285 million settlement last fall.

In a Nov. 28 order, Rakoff found the proposed settlement was “neither reasonable, nor fair, nor adequate, nor in the public interest,” primarily because it contained no admission of wrongdoing.

The 2nd Circuit in a 17-page, unsigned order didn’t see it that way. “We doubt whether the absence of proven or admitted liability could justify the refusal to approve the settlement,” the court wrote. Rakoff's posture – "requiring a binding admission of liability as a condition of approval of the settlement – virtually precludes the possibility of a settlement.”